Succession plan? What succession plan?

Most advisers don't have a succession plan. But they can take the first step toward creating one by developing an emergency backup plan in case of death or disability, said officials at Fidelity Institutional Wealth Services. “We're getting calls from Fidelity clients, whose advisers passed away and they can't talk to anyone,” Waldemar Kohl, vice president at Fidelity Institutional Wealth Services, said in an interview Wednesday at a conference for Fidelity-affiliated RIAs in Dana Point, Calif. “It's a big issue,” he said. Indeed, Mr. Kohl said about three-quarters of Fidelity RIAs do not have a succession plan. At the session Mr. Kohl said advisers should find another like-minded professional as an emergency backup. He then laid out three basic transition options: an internal transition track, a merge-and-stay-involved track, and a sell-and-move-on track. RIAs will need a temporary power of attorney so another adviser can take over, and a buy-sell agreement with someone outside the practice, Mr. Kohl told InvestmentNews. “A buy-sell is a gateway to a full succession strategy,” added Jylanne Dunne, a senior vice president of practice management at Fidelity. “It gets them thinking about it.” Most advisers see themselves as buyers of other firms, “but when they really think about it, they're thinking about mergers,” Mr. Kohl said. The advisory industry has a clear need to address the succession issue, said Paul Lally, president of Gladstone Associates, a mergers and acquisitions consultant. It is an industry “predominantly made up of first-generation businesses, with 95% privately owned,” he said during the conference. But family-owned businesses of all types suffer from a 70% failure rate in transferring from the first to the second generation, Mr. Lally said.